Whether you are paying taxes as a homeowner or someone who runs a business, your tax documents are of great importance. You know you need them to prepare your taxes from the previous year. However, you may have to store tax paperwork going back years for possible events like an IRS tax audit.
As U.S. News and World Report explains, there are different ways to store your tax documents. However, you should recognize possible risks by inadequately storing them and take precautions when necessary.
Storing your paper documents
Many people keep their tax documents in boxes or crates. You may want to look for something sturdy and easy to organize like a file cabinet. However, if you fear losing your documents to fire or a natural disaster like a flood, you may buy a fireproof safe. Once your paper documents become obsolete, consider shredding them to keep someone from discovering your personal financial information.
Storing digital copies
Backing up your tax documents in digital files may provide you with copies in case you lose your physical documents. Still, digital copies carry some risk. If you keep them in your computer, a hacker who gains access to your system may discover them. Sometimes people become victims of fraudsters who seize their important files and hold them for ransom.
To avoid losing your digital copies, you might store your files off your computer in a place like an external hard drive or a cloud. Even so, you should not skimp out on security. With measures like a two-factor authentication system for your cloud, you may make it harder for thieves to gain access to your files.